Global oil prices at multiyear highs helped double Canadian Natural Resources Ltd.’s CNQ-T quarterly net profit to $3.1-billion, the company said Thursday, as it pushed closer to its debt-reduction goal.
Record quarterly profits have splashed across the books of Canadian producers this earnings season, driven by surging energy prices amid supply fears as Russia continues its war on Ukraine. Cenovus Energy, for example, reported a more than seven-fold jump in quarterly profit last week.
Like other Canadian energy companies capitalizing on the high-price environment, CNRL is looking to boost dividends even further. Part of that strategy includes a plan to allocate additional free cash flow as incremental returns to shareholders after it reduces its net debt to $8-billion.
Chief financial officer Mark Stainthorpe expects CNRL will hit its debt target late this year or early next.
“It obviously depends on your forecast for pricing and lots of other factors that impact the ability to pay down the debt, but we are looking at significant free cash flow through the year,” Mr. Stainthorpe said on a conference call with analysts Thursday.
However, analysts noted some rival companies are targeting more generous returns.
“While a good message, it is not as strong as Cenovus and MEG Energy’s recent messages to eventually return 100% of FCF [free cash flow] to shareholders, in our view,” Eight Capital analyst Phil Skolnick said in a research note.
CNRL said net earnings stood at $3.1-billion, or $2.63 a share, for the first quarter ended March 31. That’s up from $1.38-billion, or $1.16 a share, a year earlier.
On Thursday afternoon CNRL shares were down about 3.7 per cent to $81.42 on the Toronto Stock Exchange, part of a broad decline in Canadian energy stocks.
CNRL spent $482-million on two acquisitions in Western Canada during the quarter, acquiring the remaining 50-per-cent working interest in the Pike oil sands lease from BP and buying land at Wembley in the Montney shale play in northwestern Alberta.
The Pike play sits right next door to the company’s Jackfish and Kirby assets in Northern Alberta; tying them together will “create significant long-term value in the thermal operation for the company,” Mr. McKay said.
CNRL is also targeting eight new wells on its additional land in the Montney.
President Tim McKay said that while the transaction will result in only small production volumes at present, “because of the proximity of the land and our infrastructure, we see a lot of value to be able to develop that – cost-effectively – over the long term.”
And the Pike asset won’t increase CNRL’s total absolute greenhouse gas emissions, even as it boosts production, the company says, because they’re all part of potential projects under the Oil Sands Pathways to Net Zero initiative.
That alliance is a group of oil sands companies targeting net-zero greenhouse gas emissions by 2050. It covers about 95 per cent of production in the oil sands region in Alberta’s north and centres on carbon capture, utilization and storage (CCUS), a technology that prevents greenhouse gas emissions from escaping into the atmosphere.
Mr. McKay said teams from the initiative submitted applications to the Alberta government secure pore space (the underground geological formations where captured carbon from CCUS projects is stored) at the end of April, and hope to receive an answer soon.
“Obviously we need to work with the Alberta government to not only secure the pore space in a timely manner,” he said, adding that the group of oil companies is also looking for other ways the province could help the project move forward.
CNRL’s quarterly production stood at 1.28 million barrels of oil equivalent per day, marginally up from 1.2 million a year earlier.
The company noted that production was hit by higher energy costs, but said in an e-mail that it is trying to find ways to reduce consumption.
With a report from Reuters
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